ESSENTIAL ENERGYRVICES SELECTED INFORMATION
| (in thousands of dollars except per share and percentages) | For the three months ended | For the years ended | |||||||||||||
| 2020 | 2019 | 2020 | 2019 | 2018 | |||||||||||
| Revenue | $ | 24,554 | $ | 27,323 | $ | 96,173 | $ | 141,133 | $ | 189,894 | |||||
| Gross margin⁽ⁱ⁾ | 5,810 | 3,016 | 20,418 | 26,055 | 32,681 | ||||||||||
| Gross margin % | 24% | 11% | 21% | 18% | 17% | ||||||||||
| EBITDAS⁽¹⁾⁽ⁱ⁾ | 4,105 | 1,729 | 13,530 | 16,975 | 19,719 | ||||||||||
| EBITDAS % | 17% | 6% | 14% | 12% | 10% | ||||||||||
| Net loss⁽ⁱ⁾⁽ⁱⁱ⁾ | (4,226 | ) | (3,161 | ) | (16,810 | ) | (1,556 | ) | (8,778 | ) | |||||
| Per share - basic and diluted | $ | (0.03 | ) | $ | (0.02 | ) | $ | (0.12 | ) | $ | (0.01 | ) | $ | (0.06 | ) |
| Operating hours | |||||||||||||||
| Coil tubing rigs | 7,047 | 7,110 | 28,468 | 38,752 | 46,979 | ||||||||||
| Pumpers | 9,242 | 9,894 | 35,977 | 48,773 | 63,058 | ||||||||||
| | |||||||||||||||
| As at | |||||||||||||||
| 2020 | 2019 | 2018 | |||||||||||||
| Working capital | $ | 47,502 | $ | 47,151 | $ | 60,848 | |||||||||
| Cash | 6,082 | 846 | 410 | ||||||||||||
| Long-term debt | 53 | 6,563 | 21,388 | ||||||||||||
(i) Effective
(ii) The year ended
| 1 Refer to “Non-IFRS Measures” section for further information. |
INDUSTRY OVERVIEW
Activity across the Canadian oilfield service sector in 2020 was significantly lower than 2019. The disruptive impact of the COVID-19 pandemic, low oil prices and drastic spending cuts by exploration and production (“E&P”) companies resulted in significantly lower drilling and completion activity when compared to the prior year. Well completions, a key indicator of industry activity in the
There was some recovery in the price of West Texas Intermediate (“WTI”) oil starting in mid-November and through to the end of the year, ending 2020 at
HIGHLIGHTS
Fourth quarter 2020
Revenue for the three months ended
Fourth quarter EBITDAS(1) was
Year 2020
Revenue for the year ended
EBITDAS(1) for the year ended
Cash and long-term debt
At
RESULTS OF OPERATIONS
Segment Results – Essential Coil Well Service
| For the three months ended | For the years ended | |||||||||||
| (in thousands of dollars, except percentages, hours and fleet data) | 2020 | 2019 | 2020 | 2019 | ||||||||
| Revenue | $ | 13,059 | $ | 14,278 | $ | 53,623 | $ | 78,962 | ||||
| Operating expenses | 9,447 | 13,068 | 39,296 | 62,957 | ||||||||
| Gross margin | $ | 3,612 | $ | 1,210 | $ | 14,327 | $ | 16,005 | ||||
| Gross margin % | 28% | 8% | 27% | 20% | ||||||||
| Operating hours | ||||||||||||
| Coil tubing rigs | 7,047 | 7,110 | 28,468 | 38,752 | ||||||||
| Pumpers | 9,242 | 9,894 | 35,977 | 48,773 | ||||||||
| Active equipment fleet (i) | ||||||||||||
| Coil tubing rigs | 11 | 16 | 11 | 16 | ||||||||
| Fluid pumpers | 9 | 12 | 9 | 12 | ||||||||
| Nitrogen pumpers | 4 | 6 | 4 | 6 | ||||||||
| Total equipment fleet (i) | ||||||||||||
| Coil tubing rigs | 29 | 29 | 29 | 29 | ||||||||
| Fluid pumpers | 19 | 19 | 19 | 19 | ||||||||
| Nitrogen pumpers | 8 | 8 | 8 | 8 | ||||||||
(i) Fleet data represents the number of units at the end of the period. Crewed equipment is less than active equipment.
ECWS revenue for the three months ended
Consistent demand throughout the fourth quarter resulted in a 31% increase in operating hours over the third quarter 2020 and similar activity to the fourth quarter of 2019. Due to this increased demand, ECWS reactivated one additional coil tubing rig in the fourth quarter.
ECWS generated gross margin of
For the year ended
Segment Results – Tryton
| (in thousands of dollars, except percentages) | For the three months ended | For the years ended | ||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||
| Revenue | $ | 11,495 | $ | 13,045 | $ | 42,550 | $ | 62,171 | ||||
| Operating expenses | 8,759 | 10,967 | 34,761 | 50,689 | ||||||||
| Gross margin | $ | 2,736 | $ | 2,078 | $ | 7,789 | $ | 11,482 | ||||
| Gross margin % | 24% | 16% | 18% | 18% | ||||||||
| Tryton revenue - % of revenue | ||||||||||||
| Tryton MSFS® | 33% | 17% | 35% | 28% | ||||||||
| Conventional Tools & Rentals | 67% | 83% | 65% | 72% | ||||||||
Tryton revenue for the fourth quarter of 2020 was
Cost reduction measures implemented in the second quarter, along with benefits received under the CEWS program in
For the year ended
Equipment Expenditures
| (in thousands of dollars) | For the three months ended | For the years ended | ||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||
| ECWS | $ | 124 | $ | 1,818 | $ | 1,125 | $ | 4,587 | ||||
| Tryton | 165 | 591 | 770 | 3,160 | ||||||||
| Corporate | - | 14 | 49 | 152 | ||||||||
| Total equipment expenditures | 289 | 2,423 | 1,944 | 7,899 | ||||||||
| Less proceeds on disposal of equipment | $ | (246 | ) | $ | (307 | ) | $ | (2,280 | ) | $ | (2,710 | ) |
| Net equipment expenditures (proceeds) (1) | $ | 43 | $ | 2,116 | $ | (336 | ) | $ | 5,189 | |||
Essential classifies its equipment expenditures as growth capital(1) and maintenance capital(1):
| (in thousands of dollars) | For the three months ended | For the years ended | ||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||
| Growth capital (1) | $ | - | $ | 99 | $ | - | $ | 897 | ||||
| Maintenance capital (1) | 289 | 2,324 | 1,944 | 7,002 | ||||||||
| Total equipment expenditures | $ | 289 | $ | 2,423 | $ | 1,944 | $ | 7,899 | ||||
Essential’s 2020 equipment expenditures were focused only on critical maintenance activities required to maintain the active fleet. Capital spending in 2020 was entirely funded through proceeds on the sale of surplus assets.
2021 CAPITAL BUDGET
Essential’s 2021 capital budget was set at
OUTLOOK
WCSB commodity prices, which are a strong general predictive metric for oilfield services activity, have improved in the last three months. The price of WTI has been steadily increasing since
Even prior to the most recent commodity price increases, industry analysts and associations had generally expected a modest increase in Canadian E&P spending in 2021, compared to 2020. The E&P companies are the immediate beneficiaries of commodity price increases. To date, this has not translated into oilfield service price increases, and that is not anticipated in the near term. After years of industry downturn and low commodity prices, E&P cash flow increases are generally expected to be applied to strengthen balance sheets, return cash to shareholders and drive mergers and acquisitions. However, given the duration and magnitude of recent commodity price increases, many industry experts expect a portion of excess cash flow may result in additional capital spending in 2021. This would benefit oilfield services activity, including for Essential.
For Essential, activity for the first two months of 2021 has been steady, but as expected, below the first two months of 2020. Activity in the first quarter of 2020 was largely unaffected by the onset of COVID-19 and the oil price war, and last year saw activity continue through the full month of March. To date in 2021, activity and costs were adversely impacted by a prolonged cold stretch in February which disrupted scheduled work and increased costs for down-time inefficiencies and repairs. Activity for the month of
With anticipated improving industry conditions, Essential has been using its strong financial position to prepare for expected activity growth in the second half 2021 and into 2022. In response to competitive compensation pressures and increasing activity, partial restoration of compensation has been initiated in the first quarter of 2021, which will increase Essential’s costs. Given Essential’s reduced and lean workforce, it is critical to fairly compensate and retain experienced personnel. ECWS also reactivated one more coil tubing rig in the quarter to meet customer demand. The active fleet now includes 12 coil tubing rigs and nine fluid pumpers. This ensures suitable equipment will be available for differing customer and regional needs. Crew recruiting continued through the first quarter 2021 to ensure ECWS can meet short notice demands of key customers, while also accommodating the unique risks and logistics of operating in a COVID-19 world. There are currently fewer crewed packages than active. Crewing levels are adjusted to anticipated customer demand.
The
Essential remains financially strong. To date in 2021, Essential has been in a net cash position, with cash exceeding long-term debt by
The Management’s Discussion and Analysis and Financial Statements for the quarter and year ended
(1)Non-IFRS Measures
Throughout this news release, certain terms that are not specifically defined under International Financial Reporting Standards (“IFRS”) are used to analyze Essential’s operations. In addition to the primary measures of net loss and net loss per share in accordance with IFRS, Essential believes that certain measures not recognized under IFRS assist both Essential and the reader in assessing performance and understanding Essential’s results. Each of these measures provides the reader with additional insight into Essential’s ability to fund principal debt repayments and capital programs. As a result, the method of calculation may not be comparable with other companies. These measures should not be considered alternatives to net loss and net loss per share as calculated in accordance with IFRS.
EBITDAS – EBITDAS is earnings before finance costs, income taxes, depreciation, amortization, transaction costs, losses or gains on disposal, write-down of assets, impairment loss, foreign exchange gains or losses, and share-based compensation, which includes both equity-settled and cash-settled transactions. These adjustments are relevant as they provide another measure which is considered an indicator of Essential’s results from its principal business activities.
Growth capital – Growth capital is capital spending which is intended to result in incremental revenue.
Maintenance capital – Maintenance capital is capital spending that is incurred in order to refurbish, replace or extend the life of existing equipment.
Net equipment expenditures – This measure is equipment expenditures less proceeds on the disposal of equipment. Essential uses net equipment expenditures to describe net cash outflows related to managing Essential’s property and equipment.
Working capital – Working capital is calculated as current assets less current liabilities.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
| As at | As at | |||||||||
| (in thousands of dollars) | 2020 | 2019 | ||||||||
| Assets | ||||||||||
| Current | ||||||||||
| Cash | $ | 6,082 | $ | 846 | ||||||
| Trade and other accounts receivable | 22,026 | 24,543 | ||||||||
| Inventory | 32,157 | 36,616 | ||||||||
| Prepayments and deposits | 1,625 | 1,789 | ||||||||
| 61,890 | 63,794 | |||||||||
| Non-current | ||||||||||
| Property and equipment | 89,273 | 111,141 | ||||||||
| Right-of-use lease asset | 8,513 | 12,600 | ||||||||
| Intangible assets | 187 | 295 | ||||||||
| - | 3,565 | |||||||||
| 97,973 | 127,601 | |||||||||
| Total assets | $ | 159,863 | $ | 191,395 | ||||||
| Liabilities | ||||||||||
| Current | ||||||||||
| Trade and other accounts payable | $ | 8,905 | $ | 11,513 | ||||||
| Share-based compensation | 1,369 | 1,189 | ||||||||
| Income taxes payable | 25 | 32 | ||||||||
| Current portion of lease liability | 4,089 | 3,909 | ||||||||
| 14,388 | 16,643 | |||||||||
| Non-current | ||||||||||
| Share-based compensation | 3,443 | 2,740 | ||||||||
| Long-term debt | 53 | 6,563 | ||||||||
| Deferred tax liability | - | 2,624 | ||||||||
| Long-term lease liability | 7,801 | 12,154 | ||||||||
| 11,297 | 24,081 | |||||||||
| Total liabilities | 25,685 | 40,724 | ||||||||
| Equity | ||||||||||
| Share capital | 272,732 | 272,732 | ||||||||
| Deficit | (145,210 | ) | (128,400 | ) | ||||||
| Other reserves | 6,656 | 6,339 | ||||||||
| Total equity | 134,178 | 150,671 | ||||||||
| Total liabilities and equity | $ | 159,863 | $ | 191,395 | ||||||
CONSOLIDATED STATEMENTS OF NET LOSS AND COMPREHENSIVE LOSS
| For the years ended | ||||||||||
| (in thousands of dollars, except per share amounts) | 2020 | 2019 | ||||||||
| Revenue | $ | 96,173 | $ | 141,133 | ||||||
| Operating expenses | 75,755 | 115,078 | ||||||||
| Gross margin | 20,418 | 26,055 | ||||||||
| General and administrative expenses | 6,888 | 9,080 | ||||||||
| Depreciation and amortization | 19,141 | 15,996 | ||||||||
| Share-based compensation expense | 2,107 | 2,362 | ||||||||
| Impairment loss | 10,293 | - | ||||||||
| Other (income) expense | (211 | ) | 728 | |||||||
| Operating loss | (17,800 | ) | (2,111 | ) | ||||||
| Finance costs | 1,604 | 1,761 | ||||||||
| Loss before taxes | (19,404 | ) | (3,872 | ) | ||||||
| Current income tax expense | 30 | 65 | ||||||||
| Deferred income tax recovery | (2,624 | ) | (2,381 | ) | ||||||
| Income tax recovery | (2,594 | ) | (2,316 | ) | ||||||
| Net loss | (16,810 | ) | (1,556 | ) | ||||||
| Unrealized foreign exchange gain | 295 | 72 | ||||||||
| Comprehensive loss | $ | (16,515 | ) | $ | (1,484 | ) | ||||
| Net loss per share | ||||||||||
| Basic and diluted | $ | (0.12 | ) | $ | (0.01 | ) | ||||
| Comprehensive loss per share | ||||||||||
| Basic and diluted | $ | (0.12 | ) | $ | (0.01 | ) | ||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the years ended | ||||||||||
| (in thousands of dollars) | 2020 | 2019 | ||||||||
| Operating Activities: | ||||||||||
| Net loss | $ | (16,810 | ) | $ | (1,556 | ) | ||||
| Non-cash adjustments to reconcile net loss to operating cash flow: | ||||||||||
| Depreciation and amortization | 19,141 | 15,996 | ||||||||
| Deferred income tax recovery | (2,624 | ) | (2,381 | ) | ||||||
| Share-based compensation | 22 | 83 | ||||||||
| Provision for impairment of trade receivable | 1,100 | 500 | ||||||||
| Finance costs | 1,604 | 1,761 | ||||||||
| Impairment loss | 10,293 | - | ||||||||
| Gain on disposal of assets | (399 | ) | (210 | ) | ||||||
| Funds flow | 12,327 | 14,193 | ||||||||
| Changes in non-cash operating working capital: | ||||||||||
| Trade and other accounts receivable before provision | 1,571 | 11,025 | ||||||||
| Inventory | 4,236 | 3,853 | ||||||||
| Income taxes | (7 | ) | 32 | |||||||
| Prepayments and deposits | 164 | 385 | ||||||||
| Trade and other accounts payable | (2,353 | ) | (2,965 | ) | ||||||
| Share-based compensation | 884 | 1,179 | ||||||||
| Net cash provided by operating activities | 16,822 | 27,702 | ||||||||
| Investing Activities: | ||||||||||
| Purchase of property, equipment and intangible assets | (1,944 | ) | (7,899 | ) | ||||||
| Non-cash investing working capital in trade and other accounts payable | (257 | ) | (1,428 | ) | ||||||
| Proceeds on disposal of equipment | 2,280 | 2,710 | ||||||||
| Net cash provided by (used in) investing activities | 79 | (6,617 | ) | |||||||
| Financing Activities: | ||||||||||
| Repayment of long-term debt | (6,697 | ) | (14,950 | ) | ||||||
| Finance costs paid | (543 | ) | (595 | ) | ||||||
| Payments of lease liability | (4,422 | ) | (5,110 | ) | ||||||
| Net cash used in financing activities | (11,662 | ) | (20,655 | ) | ||||||
| Foreign exchange (loss) gain on cash held in a foreign currency | (3 | ) | 6 | |||||||
| Net increase in cash | 5,236 | 436 | ||||||||
| Cash, beginning of year | 846 | 410 | ||||||||
| Cash, end of year | $ | 6,082 | $ | 846 | ||||||
FORWARD-LOOKING STATEMENTS AND INFORMATION
This news release contains “forward-looking statements” and “forward-looking information” (collectively referred to herein as “forward-looking statements”) within the meaning of applicable securities legislation. Such forward-looking statements include, without limitation, forecasts, estimates, expectations and objectives for future operations that are subject to a number of material factors, assumptions, risks and uncertainties, many of which are beyond the control of the Company.
Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by the words “expects”, “plans”, “anticipates”, “believes”, “intends”, “estimates”, “continues”, “future”, “forecasts”, “potential”, “outlook” and similar expressions, or are events or conditions that “will”, “would”, “may”, “likely”, “could”, “should”, “can”, “typically”, “traditionally” or “tends to” occur or be achieved. This news release contains forward-looking statements, pertaining to, among other things, the following: Essential’s capital spending budget and expectations of how it will be funded; impacts of the COVID-19 pandemic; oil and natural gas industry and oilfield services sector activity and the outlook including the impact of E&P cashflow increases and the benefits to Essential; oilfield service pricing; the Company’s capital management strategy and financial position; the impact of governmental and Company measures implemented in response to the COVID-19 pandemic; Essential’s outlook, activity levels, cost structure, active and inactive equipment, crew counts, cost cutting measures and their implications; benefits under the federally funded site rehabilitation programs, including the anticipated work for Essential and Tryton arising from the programs and the timing of the same; benefits to Essential under the PPP Loans; and Essential’s credit capacity, liquidity and ability to meet its financial needs through to the end of 2021.
The forward-looking statements contained in this news release reflect several material factors and expectations and assumptions of Essential including, without limitation: the COVID-19 pandemic, unprecedented economic slow down and low oil prices, and the duration and impact thereof; that Essential will continue to conduct its operations in a manner consistent with past operations; the general continuance of current or, where applicable, assumed industry conditions; availability of debt and/or equity sources to fund Essential's capital and operating requirements as needed; and certain cost assumptions.
Although the Company believes that the material factors, expectations and assumptions expressed in such forward-looking statements are reasonable based on information available to it on the date such statements are made, undue reliance should not be placed on the forward-looking statements because the Company can give no assurances that such statements and information will prove to be correct and such statements are not guarantees of future performance. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties.
Actual performance and results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to: known and unknown risks, including those set forth in the Company’s Annual Information Form (“AIF”) (a copy of which can be found under Essential’s profile on SEDAR at www.sedar.com); a significant expansion of COVID-19 pandemic and the impacts thereof; the risks associated with the oilfield services sector, including demand, pricing and terms for oilfield services; current and expected oil and natural gas prices; exploration and development costs and delays; reserves discovery and decline rates; pipeline and transportation capacity; weather, health, safety, market and environmental risks; integration of acquisitions, competition, and uncertainties resulting from potential delays or changes in plans with respect to acquisitions, development projects or capital expenditures and changes in legislation including, but not limited to, tax laws, royalties, incentive programs and environmental regulations; stock market volatility and the inability to access sufficient capital from external and internal sources; the ability of the Company’s subsidiaries to enforce legal rights in foreign jurisdictions; general economic, market or business conditions including those in the event of an epidemic, natural disaster or other event; global economic events; changes to Essential’s financial position and cash flow, and the higher degree of uncertainty related to the estimates and judgements made in the preparation of financial statements; the availability of qualified personnel, management or other key inputs; currency exchange fluctuations; changes in political and security stability; potential industry developments; and other unforeseen conditions which could impact the use of services supplied by the Company. Accordingly, readers should not place undue importance or reliance on the forward-looking statements. Readers are cautioned that the foregoing list of factors is not exhaustive and should refer to “Risk Factors” set out in the AIF.
Statements, including forward-looking statements, contained in this news release are made as of the date they are given and the Company disclaims any intention or obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.
Additional information on these and other factors that could affect the Company’s operations and financial results are included in reports on file with applicable securities regulatory authorities and may be accessed under Essential’s profile on SEDAR at www.sedar.com.
ABOUT ESSENTIAL
Essential provides oilfield services to oil and natural gas producers, primarily in western
MSFS® is a registered trademark of
The TSX has neither approved nor disapproved the contents of this news release.
PDF available: http://ml.globenewswire.com/Resource/Download/bf358745-c527-4243-b80c-9fe36461617d
For further information, please contact: Garnet K. Amundson President and CEO Phone: (403) 513-7272 service@essentialenergy.ca
2021 GlobeNewswire, Inc., source
